Public Bill Committee

[Sir Nicholas Winterton in the Chair]

Schedule 13

Ownership of licensed bodies

Amendment proposed [this day]: No. 212, in schedule 13, page 197, line 11, at end insert
‘Licensing rules must provide that, in determining whether the requirements of sub-paragraph 1 are met, the burden of proof rests on the person who wishes to hold the restricted interest.’.—[Mr. Djanogly.]

Question again proposed, That the amendment be made.

Nicholas Winterton: Before we adjourned, I understood that the hon. Member for Huntingdon was about to ask the permission of the Committee to withdraw his amendment but, sadly, as he cannot be here, I must put the question.

Question put, That the amendment be made:—

The Committee divided: Ayes 3, Noes 8.

Question accordingly negatived.

Amendments made: No. 158, in schedule 13, page 197, line 15, leave out ‘an interest in’ and insert ‘holding’.
No. 159, in schedule 13, page 197, line 18, leave out ‘power’ and insert ‘rights’.
No. 160, in schedule 13, page 197, line 24, leave out ‘an interest in’ and insert ‘holding’.
No. 161, in schedule 13, page 197, line 27, leave out ‘power’ and insert ‘rights’.
No. 162, in schedule 13, page 208, line 29, leave out ‘an interest in shares in a licensed body’ and insert
‘a shareholding in a licensed body, or in a parent undertaking of a licensed body,’.
No. 163, in schedule 13, page 208, line 31, at end insert—
‘(aa) a non-authorised person may not have an entitlement to exercise, or control the exercise of, voting rights in a licensable body, or a parent undertaking of a licensable body, which exceeds a limit specified in the rules (“the voting limit”);’.
No. 164, in schedule 13, page 208, line 32, leave out ‘in which non-authorised persons have an interest’ and insert
‘, or a parent undertaking of a licensed body, held by non-authorised persons’.
No. 165, in schedule 13, page 208, line 34, at end insert—
‘(c) the total proportion of voting rights in a licensed body, or a parent undertaking of a licensed body, which non-authorised persons are entitled to exercise or control the exercise of, may not exceed a limit specified in the rules.
( ) Rules made under any paragraph of sub-paragraph (1) in relation to a licensed body and a parent undertaking may specify different limits in relation to the licensed body and the parent undertaking.’.
No. 166, in schedule 13, page 208, line 35, leave out from ‘(1)(a)’ to end of line 37 and insert
‘or (aa) may provide that references in those rules to a person, in relation to a person’s shareholding or entitlement to exercise or control the exercise of voting rights, are to—
(a) the person,
(b) any of the person’s associates, or
(c) the person and any of the person’s associates taken together.’.
No. 167, in schedule 13, page 209, line 2, after ‘body’, insert
‘, or a parent undertaking of a licensed body,’.
No. 168, in schedule 13, page 209, line 4, at end insert
‘or (aa) in relation to the body.’.
No. 169, in schedule 13, page 209, line 5, leave out from ‘acquires’ to ‘and’ in line 6 and insert ‘—
(a) a shareholding in the body which exceeds the share limit, or
(b) an entitlement to exercise, or control the exercise of, voting rights in the body which exceeds the voting limit,
must notify the body (and, if the body is a parent undertaking of a licensed body, the licensed body)’.
No. 170, in schedule 13, page 209, line 21, leave out ‘licensed body’ and insert
‘body (and, if the body is a parent undertaking of a licensed body, the licensed body)’.
No. 171, in schedule 13, page 209, line 33, leave out paragraph 41.
No. 172, in schedule 13, page 209, line 38, leave out ‘relevant’.
No. 173, in schedule 13, page 210, line 2, leave out ‘interest in shares in any body’ and insert
‘shareholding in a body corporate with a share capital’.
No. 174, in schedule 13, page 210, line 12, leave out sub-paragraph (3) and insert—
‘( ) In sub-paragraph (1)(b), references to a person’s shareholding are to be read in accordance with paragraph 3(3) or 4(2) (as the case may be).’.
No. 175, in schedule 13, page 210, line 15, after ‘38(1)(a)’, insert ‘or (aa)’.
No. 176, in schedule 13, page 210, line 16, leave out from ‘a’ to end of line 17 and insert ‘licensed body if—
(a) the person’s shareholding in the body, or a parent undertaking of the body, exceeds the share limit, and the body or parent undertaking (as the case may be) is a body corporate with a share capital, or
(b) the person’s entitlement to exercise or control the exercise of voting rights in the body, or a parent undertaking of the body, exceeds the voting limit by virtue of the person holding shares in a body corporate with a share capital.’.
No. 177, in schedule 13, page 210, line 18, leave out from ‘means’ to end of line 19 and insert—
‘(a) in a case within sub-paragraph (1)(a), the number of shares by which the person’s shareholding exceeds the share limit, and
(b) in a case within sub-paragraph (1)(b), the number of shares held by the person in excess of the number of shares the person could hold without the person’s entitlement to exercise, or control the exercise of, voting rights exceeding the voting limit.’.
No. 178, in schedule 13, page 210, line 20, leave out sub-paragraph (3) and insert—
‘( ) References in this paragraph to a person’s shareholding (or holding of shares) or entitlement are to be read in accordance with any applicable licensing rules made under paragraph 38(2).’.
No. 179, in schedule 13, page 210, line 25, leave out ‘relevant’.
No. 180, in schedule 13, page 213, line 20, at end insert ‘or (aa).’.
No. 181, in schedule 13, page 213, line 22, leave out from ‘where’ to end of line 24 and insert ‘a non-authorised person acquires—
(a) a shareholding in a licensed body or parent undertaking of a licensed body which exceeds the share limit, or
(b) an entitlement to exercise, or control the exercise of, voting rights in a licensed body or parent undertaking of a licensed body which exceeds the voting limit.’.
No. 182, in schedule 13, page 213, line 36, at end insert—
‘( ) If the share limit or voting limit is breached in relation to a parent undertaking of a licensed body, references in sub-paragraphs (3) and (6) to the licensed body include the parent undertaking.’.
No. 183, in schedule 13, page 214, line 7, at end insert—
‘( ) If the share limit or voting limit is breached in relation to a parent undertaking of a licensed body, references in sub-paragraphs (1) and (5) to the licensed body include the parent undertaking.’.—[Bridget Prentice.]

Question proposed, That this schedule, as amended, be the Thirteenth schedule to the Bill.

Simon Hughes: I wish to ask a general question about the operation of the schedule, for which clause 89 is the trigger clause. The schedule sets out the possibility of non-authorised people holding interests in licensed bodies and it is about the activities of non-legal people and professionals in the new business structures.
 My question is consumerist, so I hope that it will be attractive to the Minister. Putting aside the concerns about this part of the Bill, it is important that the public, as well as other interested people, know what is happening because of the Bill. When a person applies for a licence to enable them to work in a particular way, information on who is involved with or owns a company, and who has what percentage of the shares or interests and so on, is crucial. The people who grant licences will have plenty of opportunity to satisfy themselves about such information: they will ask for and receive it, they will check and approve it, and ask further questions about it, in the way that any regulatory or licensing body would.
 Consumers would be interested in commenting on a prospective application, as with a planning application. The Minister will know as well as any of us that when there is a controversial planning application, public interest might arise because people have been watching a particular site like hawks. Anyone with an interest knows as soon as a planning application is submitted to a council and they will be geared up to make their representations. Interest might also arise from a local authority-led consultation in which people participate, or simply because they hear a rumour—often, the interest arises because there is a rumour that something is about to happen.
 Let me take an example given on Second Reading by the hon. Member for Banbury (Tony Baldry). He said that Banbury is a town with a couple of solicitors firms whose work is well regarded and respected. A licence application for an alternative business structure that could affect provisional legal services might be made. Let us imagine, for example, that one of the large insurance companies has an office in Oxford and decides to provide services around the country, but that it particularly wants to start in Oxfordshire. The head office could be in Oxford or elsewhere. I am thinking of a company such as Axa or another large claims company that does a great deal of work. Such a company would obviously be able to offer certain services at a low price because of the volume of work that it does. What is the process by which the public would come to know who was applying for a licence and about their other interests, and at what stage?
 For my second example, I shall draw on the evidence given yesterday to the Treasury Committee about private equity companies, which was widely reported. Some of the new organisations are not well known by their private equity name, but are instead known if one discovers what businesses they run. I discovered yesterday that one such company runs the AA. Who owns those organisations is relevant to local consumers, citizens advice bureaux, consumer councils, consumers’ associations, town or parish councils and all sorts of other people who have an interest in knowing. If there was a share buy-out of such an organisation, how would people be brought up to date with the relevant information? My question is a general one about how the public and those with an interest would come to know who was really behind an application. There may be a name on a plate, but people might not know who is behind the organisation.

Stephen Hesford: Has the hon. Gentleman been following the Bill, as we have? What does he imagine the consumer panel might be for and  might want to involve itself in if it is not a public consultation on these issues? That might answer his question.

Simon Hughes: Yes, but only as far as a national view of these things goes. It does not answer my question from an Oxfordshire or a Banbury perspective unless there is a guarantee that before any such licence was considered, let alone granted, the local community would be informed and consulted.
 To take the controversial examples cited by the hon. Member for Bassetlaw, someone who had had a bad track record in a particular part of the country might emerge under a different guise with other partners. How will local people and local organisations know what is going on? How will they know who the applicant is and who controls the interest? How will they be able to make representations before any decision is made?

Bridget Prentice: I am not sure that I can directly answer the hon. Gentleman’s question. If sensitive personal information about private investors were available to individual members of the public, there would be a danger of breaches of confidentiality or property rights. As my hon. Friend the Member for Wirral, West mentioned, there is the consumer panel, which is an innovation. It would be representative of the public.
I am sure that it would be appropriate to go down the road, either in the Bill or elsewhere, of granting the public wide access to that kind of information. Some of this has to be based on normal legislative practice. We rely on the board and the licensing authorities to be very thorough in the way that they investigate potential applicants.
 Finally, the hon. Gentleman prayed in aid the example used by my hon. Friend the Member for Bassetlaw. As we discussed earlier, the licensing authority would have the opportunity to investigate someone who tried to pop up under a different guise. It would not be possible in normal circumstances to provide that information to the public. On the other hand, it would be possible for the licensing authority, under its rules, to make some provision for that. No doubt when the licensing authorities read the Hansard of these debates they might want to take that into consideration.

Simon Hughes: That is really unsatisfactory. I am going to go back to my example. It is not met by the consumer panel point made by the hon. Member for Wirral, West. In Oxfordshire, to take the vested interest group first, there is the Oxfordshire branch of the Law Society. There will then be other Oxfordshire organisations—the Oxfordshire citizens advice bureau and other bodies such as the women’s institute, the Townswomen’s Guild, the rotary club and all the local organisations that have an interest in business and commerce. There may be a chamber of commerce.
I see nothing in the Bill—perhaps the Minister can show me that I have missed something—to providethat where an application is made for a licence under clause 84, any consultation is necessary with anyone directly affected in the area.
 There is an opportunity for consultation at national level. When a major application that would fundamentally change the nature of provision is made, the licensing authority may dutifully perform what is set out in the Bill, and decide what is to be done under the rules under clause 83, or examine policy documents. I should be grateful, however, if the Minister told me whether AXA, for example, made an application to provide the relevant services across Oxfordshire, any provision would guarantee that the people of Oxfordshire would know what had happened, or what might happen, before it went ahead. If that is not the case, the Bill is significantly defective.

Bridget Prentice: I am not sure that I shall be able to satisfy the hon. Gentleman on this matter. It is not common practice for such information to be readily available to the public. However, I draw his attention to clause 87, on registration, under which the register of licensed bodies must be available. It must contain
“the names and places of business of all bodies which hold or have held licences granted by the licensing authority.”
That does not, of course, include applicants. However, clause 87(3) states that
“information contained in the entries in its register”
must be
“available for inspection by any person during office hours and without payment.”
That does not go as far as the hon. Gentleman would like. However, regarding the example that he gave, in granting a licence the authority must take into account all the regulatory objectives that we have discussed at length, and I imagine that in so doing it would take into account the situation in particular communities. It would be for the licensing authority, if it so wished, to consult on and discuss some of those issues with those communities. The matter is not explicit in the Bill; I do not think that that would be appropriate. However, if the arrangement is to work properly, the licensing authority, which has duties under clause 87 on the granting of applications and adherence to regulatory objectives, will protect the consumer. I think that that is as far as I can go in helping the hon. Gentleman.

Simon Hughes: I hear what the Minister says and I accept that clause 87 imposes a duty to maintain a register showing who is licensed and what they have done. That is clearly a different point, and the Bill is unsatisfactory in that respect.
The Minister has confirmed that there is a gap in the Bill in the matter of the consumers’ interest—that is her phrase. Consumers will be given a new system, without necessarily knowing that it is coming down the track, or knowing anything about the decision. I intend to table an appropriate amendment to make sure, in the case of any significant licensing application that would have an impact on the relevant community, that there is a duty to provide appropriate consultation with the community before any decision is made. Without that, and without an opportunity to respond, the system will not be consumer-led. It will be a market-led system; it will probably be led by the big boys and girls, rather than the little ones—by those with the financial clout to come into the market. It might be to the detriment of the consumer, rather than their benefit, and it would be brought about while they were kept in ignorance of what was happening. I am grateful for the Minister’s answers, which confirm my suspicions about the Bill. I shall certainly return to the matter on Report.

Question put and agreed to.

Schedule 13, as amended, agreed to.

Clause 90

Duties of non-authorised persons

Amendment made: No. 114, in clause 90, page 51,line 10, leave out ‘or has an interest in shares’ and insert
‘or has an interest or an indirect interest’.—[Bridget Prentice.]

Clause 90, as amended, ordered to stand part of the Bill.

Clause 91

Duties of Head of Legal Practice

Question proposed, That the clause stand part of the Bill.

Simon Hughes: The clause sets up one of two new posts in licensed bodies—head of legal practice—and sets out the duties of the post holder. Clause 92 sets up the other new post, head of finance and administration. Both posts are self-explanatory, and it is clearly important that those responsibilities are divided. I can see the argument for that.
 Schedule 11 is the other side of the coin. Part 2 of the schedule sets out “structural requirements” for the management of the organisations, including requirements for general management and for the heads of legal practice and of finance and administration. The schedule gives criteria for who is a “fit and proper person” to be head of legal practice, and I should like to ask the Minister a question about that from a lay perspective.
Each organisation will have a head of legal practice, who must be a lawyer in one of the authorised activities, so they could not be a lay person. They will take responsibility for all legal activity. Is it envisaged—this is not clear in the Bill—that the decision on the appropriateness of the organisation will be taken on the basis of the organisation as a whole, without considering who is its head of legal practice, or will it be a bit like the application for a licence currently made to a local authority and traditionally to a magistrates court whereby it is the prospective licensee whose fitness and propriety are considered? It is not sufficient to say that the Whitbread brewery owns a pub; it must ensure that the pub’s tenant is fit and proper. Both are material considerations. To give an example, there are some rogue business people with an extremely bad reputation for ripping people off and not having the public interest at heart. A Mr. van Hoogstraten comes to mind in that category.

Henry Bellingham: He is a Lib Dem.

Simon Hughes: He is certainly not. I sincerely hope for everyone’s sake that he is not a member of any party represented in this room. He has a terrible business reputation for being an exploitative landlord, but there is nothing to prevent him or one of his companies from applying to join a licensed body. The head of legal services might have worked for somebody like that for one, 10 or 20 years, passed their exams and qualified as a lawyer. I am keen to know what the test will be when the licensing authority decides whether to grant the licence.
 Will there effectively be two tests—is the organisation considered legally and financially competent, and are the two people put up as heads of legal practice and finance and administration regarded as fit and proper? Finally, when the time comes and the procedures in the Bill are established for those tests, if the head of legal practice is replaced and someone else is nominated, is it expected that the licensing process should start in good time, so that, if someone else is nominated, there would be an opportunity for the licensing authority to say, “No, they are absolutely not satisfactory, and they are not a fit and proper person. We do not think that they have the experience, and we do not know enough about them, so unless and until you produce some different people, we will not continue to license you as an organisation”? It is in the consumer’s interest that both tests should be passed, and that both organisations and individuals are passed as being fit for purpose. I am keen to know that both tests should be passed in advance, before any green light is given by the licensing authority to the organisation, so that the licensing authority can do its job under the legislation.

Bridget Prentice: The hon. Gentleman is absolutely right about the importance of those two posts under the new structure. As he points out, the head of legal practice must, of course, be a lawyer, so one would assume that they would follow the rules and the code of conduct established by the Law Society.
As for the licence application, it must set out the ABS’s structural arrangements, including the services that it intends to supply. However, it must also set out and identify the nominated holders of both of posts—the head of legal practice and the head of finance and administration. The whole application would then be considered. However, the nominated individuals will remain under consideration and will also be looked at. There are two tests, but they will invariably be made at one sitting, so to speak. Finally, in answer to the hon. Gentleman’s final question, any change in the holder of either of those positions would also have to receive approval.

Simon Hughes: May I ask a supplementary question? Is it envisaged that the licensing authority would regularly expect to see the people proposed for the posts of head of legal services and head of finance and administration, to satisfy itself, face to face as it were, that they were suitable? There is all the difference in the world between having a bit of paper that may or may not be true when it comes to people’s degrees or qualifications and seeing the people themselves. Furthermore, will there always be checks to ensure that claims that applicants make about qualifications, degrees and competence are accurate, so that we do not have the old story of the bogus degree, or the degree from the non-existent institution, or the qualification from an accountancy school that does not exist or that was closed down because it was fraudulent? Are we absolutely certain that those checks will be really rigorous and that people will not slip through the net on the basis of claims that are not true?

Bridget Prentice: That would be entirely a matter for the licensing authority, acting within its rules. I would expect it to be fairly rigorous in making those checks. Of course, as the authority works through its system of checks, there would be nothing at all to stop it from making inspections, or from rechecking organisations to which it had given a licence. Certainly, that is very much the theme of the Bill. However, regarding the specificity of the checks, any checks would have to come within the rules of each licensing authority.

Question put and agreed to.

Clause 91 ordered to stand part of the Bill.

Clauses 92 to 94 ordered to stand part of the Bill.

Clause 95

Financial penalties

Question proposed, That the clause stand part of the Bill.

Simon Hughes: It would be helpful if I may make points that significantly and substantially belong here and, although they touch on the information provision that we dealt with, I did not want, as it were, to make overlapping points on two separate provisions.
The financial penalties provision is really important. It allows a licensing authority to
“impose on a licensed body, or a manager or employee of a licensed body, a penalty of such amount as it considers appropriate.”
It then, quite reasonably, says that there will be
“rules prescribing the maximum of a penalty which may be imposed under this section”,
and that those rules will need the consent of the relevant Minister, the Lord Chancellor. That is entirely proper, in so far as it is set out as a structure for action, and the money would go to the licensing authority. What nobody has yet said as far as I can see, and notes on clauses do not say it, is how much we are talking about in terms of the maximum penalties that are in the minds of Ministers. I appreciate that we must have further debate, but want to know that we are talking about a maximum that is pretty high, and that the fines, from the beginning, will be sufficiently stiff to be a real deterrent and threat to people who do not do their job properly and competently—whether as a firm or as an individual—and to ensure that they are going to bear a relationship to the turnover and profit of the company in question.
I represent in my constituency the headquarters of the Health and Safety Executive, which has been given powers in legislation by Parliament to police health and safety. If there are breaches of health and safety regulations——something with which the hon. Member for Beaconsfield (Mr. Grieve) is familiar because he has done much work in this area——there is a power to fine a company for breaching them. I am absolutely not somebody who argues for overly regulated businesses, but I am very clear that if we are regulating building in Canary Wharf or the City, or in my own borough around London bridge, we need very tough penalties for people who breach the health and safety regulations and put lives at risk. We know how dangerous those jobs can be, and how people are still killed and injured. There has been a long debate, but health and safety powers are not sufficient. We are debating corporate manslaughter elsewhere in this building. Why are we having that debate? Because there was not thought to be sufficient liability in respect of companies running cross-channel ferries or, potentially, boats on the Thames, when they were negligent, and insufficient penalty if they were in breach.
 My question here is again a consumerist point. If the public are to be really protected, the people going into that market must know that they will only breach the regulations, or fail in that respect, at their peril. I want some clear indication of the top-level thoughts in the minds of Ministers for individuals and for companies. In relation to those issues, the one thing that most frequently comes up as an area where things can go wrong and people can fiddle the system, is in finances. There is always concern about the accounts of firms, and law firms, and many of the firms complained about, have been complained about because they put their money in the wrong account, and then moved money around to the wrong places in the solicitors’ firm.
 Are the systems are intended to make life as easy and transparent for people, both the firms and the customer, as possible? For example, at the moment, a company would need to have an annual audit. Rather than having two different processes for providing the financial information to show that the company is behaving itself—which would be absolutely necessary if there were no threat of an investigation with a view to saying something that something improper had happened—is there a way of ensuring that one bit of work is done rather than two? In other words, the money would be collected for the audit and, at the same time, for the purpose of satisfying the licensing authority, so that the company had to produce only one set of figures every year, with one lot of people overseeing it and one occasion on when it was inspected. It would all be done in a way that gave a clean bill of health both in accountancy terms and in licensing terms.
 It is no good having a licensing regime or a regulatory regime unless it has teeth, and the teeth are the financial penalties, which need to be large enough. As far as I know, the figures have not been made public, and I should therefore be grateful if the Minister would tell the Committee what the Government envisage will be their advice when the Legal Services Board is set up.

Bridget Prentice: There is no actual figure in my mind at present that would be appropriate. I agree with the hon. Gentleman that there must be appropriate fines. However, fining is only one of the available tools; punishments such as suspending, revoking the licence, referring people to other regulators and disqualification from holding specific positions are also available. It will be for the authority to consider which of those is most appropriate in the circumstances of the case.
 As the hon. Gentleman said, some organisations are far bigger than others, so the fines need to be appropriate in that respect, too. It brings to mind that to fine premiership footballers £5,000 a week is a drop in the ocean for most of them and does not make a great deal of difference to their subsequent behaviour. I therefore have some sympathy with the hon. Gentleman’s view that the fine must reflect the ability to pay.
 This part of the Bill will not come into force until 2011 and between now and then we will look at benchmarks elsewhere and consult stakeholders, who include consumers, so I will not give a figure at the moment. I simply say that the hon. Gentleman is right: from the consumer’s point of view, justice has to be seen to be done, as well as being done. The perception that a person is being fined appropriately is crucial to the consumer’s confidence.

Stephen Hesford: Subsections (3) and (4) of clause 95 state that the board will make rules, which will be agreed by the Government. It will be appropriate at that time. That is the method by which this will all be worked out.

Simon Hughes: That was what I said.

Stephen Hesford: I do not understand what it is that the hon. Gentleman does not understand.

Bridget Prentice: It is not for me to explain to my hon. Friend how the mind of the hon. Member for North Southwark and Bermondsey works. All I can say is that I do not have a figure in mind, for the very reason that my hon. Friend gave: the matter will be looked at over the next few years in consultation with stakeholders, which will, as I said, include consumers. We will consider the benchmarks set in other situations. The board will come to a conclusion, and, as my hon. Friend rightly points out, that will go through the Lord Chancellor. I cannot be more explicit than that.
It is sensible to check financial propriety but, again, there are detailed arrangements that the board and the licensing authorities will want to consider. The decision will be for them.

Simon Hughes: If the hon. Member for Wirral, West had been listening earlier, he would know that I particularly cited the two subsections to which he referred. I am fully aware of the process, but it is none the less important to flag up the importance of the issue now to make the point, which the Minister picked up, about fines needing to be proportionate to ability to pay, in terms of turnover, capital and other financial considerations and to see whether the Government have addressed the issue. Ministers said that they had not done so yet, which is a half-reasonable answer. The sooner the Government start to share their thoughts on this issue, the sooner people will understand the real implications of the Bill and whether the legislation will have teeth.
I end where I began: these are important issues, and unless the fines can be made big enough, this sanction will not be the sanction that the Bill potentially allows it to be.

Question put and agreed to.

Clause 95 ordered to stand part of the Bill.

Clauses 96 and 97 ordered to stand part of the Bill.

Clause 98

Referral of employees etc to appropriate regulator

Question proposed, That the clause stand part of the Bill.

Simon Hughes: This clause is the first of a set of linked clauses to which my comments are relevant, so I shall make my comments substantively on this clause, but they apply to clauses 99 to 102 and to schedule 14. That way, I need not trouble the Committee to debate each of those measures.
 I want to make a straightforward, general point on behalf of the people whose professional careers might be affected as a result of an investigation and disciplinary sanction, such as the employees referred to in clause 98, the people who might be disqualified under clauses 99 and 100, and the people who might be affected by a suspension or revocation of their licence under clause 101 or by an intervention under clause 102 or schedule 14.
 My experience of dealing with the regime for people in the legal profession, particularly solicitors, is that the most common type of complaint is from members of the public who feel that a grievance has not been dealt with adequately by the regulatory or complaints authorities. We shall discuss the complaints mechanisms in part 6. However, complaints from members of the profession have, periodically, been justified, such as that the process is very slow, which means that they have had a cloud hanging over them for a long time, and that the procedures are opaque, which has denied them natural justice in putting their side of the argument.
Whatever my view or the views of other hon. Members about alternative business structures, if we are to have some or all the systems, perhaps starting with a pilot or delayed scheme before they are all introduced, we need to ensure not only that the people who work within them can be dealt with toughly and without any nonsense if they behave improperly, but that the systems are reasonable.
 The structures set out in the clauses are fine. It is perfectly proper to have a referral process about an individual employee and to have disqualification, and it is important to publish lists of people who have been disqualified, so that people do not find that they are dealing with someone who is no longer eligible. It is also perfectly proper for licences to be suspended or revoked and for there to be interventions. None the less, there must be fairness on both sides. Will the Minister assure us that the Government intend that the rules, as they are set up by the Legal Services Board and as they apply down the pyramid, will ensure that the new systems are better, fairer, more transparent and more user-friendly both for the people who work in the relevant businesses and for the consumers who buy the services?
 It has not been a happy story. I can cite chapter and verse when it comes to perfectly reasonable complaints from aggrieved practitioners who feel that the system has not been fair to them. The greatest complaint on both sides is delay. Customers say, “This is a ridiculously long investigation,” and solicitors say, “It has taken ridiculously long for you to tell me whether I did anything wrong.” It will be helpful if the Minister can assure me that she understands the need for a system that is just on both sides and better than the previous one.

Nicholas Winterton: Order. Before I invite the Minister to reply, may I suggest that the hon. Member for Stafford take the place of the Parliamentary Private Secretary so that if the Minister needs information from her civil servants, they can legitimately pass it to her via the Parliamentary Private Secretary, rather than directly?

Bridget Prentice: Thank you, Sir Nicholas, for that clear explanation of the quaint but important rules of Committee. It means promotion for my hon. Friend the Member for Stafford, and rightly so—[Hon. Members: “Hear hear.”]— a week early, in this case.
 I need not delay the Committee. The hon. Member for North Southwark and Bermondsey is right. Fairness on both sides is crucial. The board and the approved regulators must act fairly and proportionately, and that applies to employees within the system as well as to consumers. Those working within the system are consumers, too, but in a slightly different sense. I can give him the assurance that the regulatory objectives and the duties under clauses 3 and 28 should ensure that the board and the authorities behave fairly towards everybody with whom they interact.

Question put and agreed to.

Clause 98 ordered to stand part of the Bill.

Clauses 99 to 102 ordered to stand part of the Bill.

Schedule 14

Licensing authority’s powers of intervention

Bridget Prentice: I beg to move amendment No. 184, in schedule 14, page 214, line 35, leave out paragraph (b).
I shall be brief. This is a technical amendment to delete wording that is superfluous because its effect is achieved elsewhere in the schedule. In order to make the provision outlined in paragraph 1 consistent with the same provisions in schedules 16 and 17—in relation to the intervention powers of both the Law Society and the Council for Licensed Conveyancers—I have deleted paragraph 1(2)(b), because that is covered by paragraph 1(2)(c), which relates to insolvency. It is unnecessary to have both of them.

David Burrowes: I appreciate that this is a technical matter. However, whether it is technical or substantive, it has to be right. I am concerned as to whether sub-paragraph (2)(b) is indeed superfluous. The reason for my concern stems from the definition of an insolvency event. For the purposes of sub-paragraph (2), paragraph 1(3)(c) states:
“an administrative receiver within the meaning of section 251 of that Act is appointed.”
I am concerned about the mention of an administrative receiver. Such a receiver is used for a different type of insolvency event from what the normal receiver would deal with, as mentioned in sub-paragraph (2)(b). Is the Minister confident that sub-paragraph (2)(b) is superfluous given that there is a distinction as set out in paragraph (3)?

Bridget Prentice: I hope that I can reassure the hon. Gentleman. The phrase “a relevant insolvency event” covers the wider aspect to which he is referring. The important thing about this technical amendment is that it brings things into line with the Law Society’s powers that are set out in relation to recognised bodies as they are amended in paragraph 113 of schedule 16; I do not want to be absolutely quoted on that. The measures under that schedule make schedule 14 consistent with Law Society powers. I hope that that gives the hon. Gentleman some reassurance.

Schedule 14, as amended, agreed to.

Clause 103 ordered to stand part of the Bill.

Clause 104

Prevention of regulatory conflict: accounts rules

Bob Neill: I beg to move amendment No. 296, in clause 104, page 56, line 30, after ‘body’, insert
‘which is not licensed by the Law Society’.

Nicholas Winterton: With this it will be convenient to discuss amendment No. 297, in clause 104, page 56, line 33, after ‘body’, insert
‘which is not licensed by the Council for Licensed Conveyancers’.

Bob Neill: Thank you, Sir Nicholas. It is a pleasure to serve under your chairmanship again.
The amendments are intended to avoid ambiguity. They will give better and proper effect to the intention behind the section, which is to prevent the regulatory conflicts that can occur in relation to accounts. We think that the regulatory system can be simplified without compromising public protection, which is the principle behind the Bill.
The intention of the provisions relating to alternative business structures is that the rules of the licensing authority are for the business rather than for any individuals who work in the ABS, and they should apply to all the activities. That seems sensible. We do not have any quibble with that. Clause 104 is intended to reinforce that by ensuring that the accounts rules of the licensing authority apply rather than those of any professional body to which particular members of the ABS may belong. For example, a solicitor working in an ABS authorised by the Council for Licensed Conveyancers would be subject to the accounts rules of the CLC rather than the Law Society. We do not have any problem with that.
The problem is with the current wording. It seems to go too far, preventing either the Solicitors Regulation Authority under its status as the Law Society’s approved regulator or the CLC from adopting the most sensible and pragmatic approach to regulation of alternative business structures. The SRA, as a licensing authority, would wish to ensure so far as possible that the same rules apply to all the legal services businesses that it regulated, whether they were traditional solicitors firms, legal disciplinary practices or ABSs. We accept that additional regulation will be required for ABSs, but the core regulations should be the same. That is the thrust of their concern, which is why they and the Council for Licensed Conveyancers suggested the amendment. We believe that it is sensible.
 Under the Bill, a firm of solicitors would become an ABS by, for example, making a finance director who was an accountant a partner of the firm. However, the finance director might quite properly decide to move on, perhaps having got a better offer elsewhere. The firm might replace him with a lawyer rather than an another non-lawyer—but still someone with the relevant expertise. At that point, it seems to us that the firm would cease to be an ABS; it would resort to being a “traditional” solicitors firm, although it could recruit a third person, a finance director who was an accountant, and become an ABS again. To have different sets of accounts rules applying to such a firm does not seem sensible. It is a needless bureaucratic burden, and it could cause extra cost and confusion—for the consumer as well as for the firm.
 The SRA is concerned that clause 104 will notpermit the Law Society to make identical rules under paragraph 20 of schedule 11 and sections 32 and 34 of the Solicitors Act 1974; yet that is what they would wish to do, as it would overcome some of those difficulties. That is exactly what concerns the Council for Licensed Conveyancers. If they were able to do that, the problem would be resolved. We therefore hope that the amendment commends itself to the Government, as it is intended to make the Bill work better.
I hope, Sir Nicholas, that I may make one more point on an important matter of principle. It is convenient to make it now, and I hope that the Minister can reply to all my questions in one go. The Bill provides for a distinct regulatory regime for ABSs. That is sensible, as it allows for the creation of new licensing authorities; and the Legal Services Board can become a licensing authority if necessary and appropriate. Should an existing approved regulator such as the SRA apply to become a licensing authority, we anticipate that the application would be made on the basis of the SRA using largely the same set of statutory powers that it uses to regulate traditional solicitors firms and legal disciplinary partnerships. That is sensible, as it would maintain a proportional approach and avoid confusion. It would also avoid having gaps in the regulatory framework—a risk that we all want to avoid. 
 It would be for the Legal Services Board to decide whether to accept that approach, but we understand that the discussions between the SRA and the Ministry of Justice were on the basis that the Bill would allow the SRA to make application in that way. It seems that the transitional provisions set out in schedule 22 anticipate, at least in part, that existing regulators might need to amend their statutory powers as part of their application to become an ABS. I should be grateful if the Minister confirmed that our understanding, and that of the various professional bodies, is correct. Such clarity would help everyone. For the reasons that I have advanced, I hope also that the amendments commend themselves to the Minister.

Bridget Prentice: I hope that I can reassure the hon. Gentleman that the SRA’s position is as he outlined his understanding of it, thereby giving both him and the SRA some reassurance. The amendments are intended to clarify whether the trumping effect of the rules made under part 5, over existing rules applicable to solicitors and licensed conveyancers, will operate only where those professionals are working in bodies regulated by authorities other than the Law Society and the Council for Licensed Conveyancers, and to determine whether those rules do not attempt to alter the position of solicitors and licensed conveyancers working in firms regulated by other authorities.
 I understand the underlying objective, which is, as the hon. Gentleman said, to avoid duplication through applying two different sets of accounts rules to ABS and existing practices. I appreciate the rationale behind that. Like the hon. Gentleman, I want to facilitate efficiency where possible, and clause 104 is consistent with that; it is intended to operate only to resolve situations where rules conflict, putting a solicitor or licensed conveyancer in a difficult position. I presume that, where the Law Society is the licensing authority for a body, its rules would not create a conflict for a solicitor within that body, and that the same would be true for the CLC and licensed conveyancers. I am happy to consider whether we need to make any further provision, just to reinforce that conflict-resolution point.
I assure the Committee that both the Law Society and the CLC will be able to apply for orders under schedule 22 or to seek board recommendations under clause 69 for amendments to their existing powers, so long as that does not conflict with the requirements of part 5. I cannot go any further than that at the moment and speculate about what the board might take into account in its recommendations or what the Lord Chancellor might decide. However, I hope that my remarks go some way towards reassuring the hon. Gentleman, the Law Society and the CLC that I understand their position.

Bob Neill: I am grateful to the Minister for replying to both points that I made and for dealing constructively and helpfully with the issue that we raised. It is clear that she, and those who advise her, are well seized of those legitimate points, so on the basis of her undertakings, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 104 ordered to stand part of the Bill.

Clause 105

Trade union exemptions

Amendment proposed: No. 115, in clause 105, page 57, line 5, leave out ‘a’ and insert ‘an independent’.—[Bridget Prentice.]

Question put, That the amendment be made:—

The Committee divided: Ayes 8, Noes 3.

Question accordingly agreed to.

Amendment made: No. 116, in clause 105, page 57, line 7, leave out second ‘a’ and insert ‘an independent’.—[Bridget Prentice.]

Clause 105, as amended, ordered to stand part of the Bill.

Clause 106

Power to modify application of licensing rules etc to special bodies

Amendments made: No. 117, in clause 106, page 57, line 10, leave out ‘a’ and insert ‘an independent’.
No. 118, in clause 106, page 57, line 36, leave out ‘in shares’ and insert ‘or an indirect interest’.—[Bridget Prentice.]

Clause 106, as amended, ordered to stand part of the Bill.

Clause 107 ordered to stand part of the Bill.

Clause 108

“Low risk body”

David Kidney: I beg to move amendment No. 271, in clause 108, page 59, line 4, leave out subsection (2) and insert—
‘(2) The management condition is that—
(a) the number of managers of the body who are non-authorised persons is less than 10% of the total number of managers; or
(b) the managers who are non-authorised persons who provide services directly or indirectly to clients within their own professional training, are members of one or more recognised professional bodies.’.

Nicholas Winterton: With this it will be convenient to discuss the following amendments: No. 272, in clause 108, page 59, line 6, leave out subsection (3) and insert—
‘(3) The ownership condition for B satisfying the management condition set out in subsection (2) is that—
(a) the proportion of shares in B in which non-authorised non managers have an interest is less than 10%, and
(b) the proportion of the voting power in B which non-authorised non managers are entitled to exercise, or control the exercise of, is less than 10%, and
(c) if B has a parent undertaking (“P”)—
(i) the proportion of shares in P in which non-authorised non-managers have an interest is less than 10%, and
(ii) the proportion of the voting power in P which non-authorised non-managers are entitled to exercise, or control the exercise of, is less than 10%.
No. 273, in clause 108, page 59, line 16, at end insert—
‘(3A) The ownership condition for B satisfying the management condition set out in paragraph 2(b) is that shares and voting power in B are only held by authorised persons or members of recognised professional bodies.’.
No. 274, in clause 108, page 59, line 19, at end insert—
‘“recognised professional body” means a body (other than an approved regulator), incorporated by Royal Charter, which makes provision for—
(a) testing the competence of those seeking admission to membership of the body as a condition for such admission; and
(b) imposing and maintaining professional and ethical standards for its members, as well as imposing sanctions for non-compliance with those standards.’.
No. 275, in clause 108, page 59, line 23, at end add—
‘(5) For the purposes of subsection (4)—
“member” means a member or member firm as defined by the appropriate rules of such a body.’.
New clause 15—Low risk and professional bodies—
‘(1) A licensing authority may apply to the Board to determine the status of a recognised professional body if it is in any doubt as to whether that professional body meets the criteria set down in this Act.
(2) A licensing authority may apply to the Board to determine whether a body “B”, which is “low risk” under section 108(2)(b) should not be treated as low risk if it considers the services to be offered by B are inconsistent with the “professional principles” set out in section 1(3).’.

David Kidney: Sir Nicholas, it is fortunate for Committee members that you have returned safely from the Falkland Islands and that consequently we are able to benefit from your firm and fair guidance as Chairman of our proceedings. I remind hon. Members of my registered interest as a non-practising solicitor. I am indebted to the Institute of Chartered Accounts in England and Wales, which from now on I shall refer to as the institute, for its assistance in drafting the amendments in the group and the new clause.
The clause defines a low-risk body. Under clause 106, which we approved a moment ago, the licensing authorities may in relation to low-risk bodies disapply some of their rules and disapply schedule 13, in whole or in part. That clause therefore recognises that the full panoply of regulation is unnecessary for some alternative business structures. Taken together, the amendments in the group would define as low-risk those multi-professional practices that consist of already highly regulated and trained professionals. The new clause would incorporate a get-out clause for the licensing authorities in some circumstances. Further, one of the amendments in the group would tighten the “10 per cent.” category of low-risk bodies in the clause, such that it would apply only to internal owners and with the full oversight of the regulator.
 I believe that there is a growing willingness across the political parties, and certainly in the professions, that part 5 should facilitate alternative business structures but ensure that the right protections are in place to deal with risk to consumers. That is certainly the thrust of the Clementi report, and I know that a lot of people in business and the professions are keen for the Government to do what they say by accepting the Hampton principles of risk-based regulation. Although there will be opportunities for significant benefit for consumers and the economy, we need to ensure that in cases where there is a low risk the process can be enabled as easily as possible. The flexibility of a low-risk category is appropriate, but clause 108 defines low-risk bodies as those with up to 10 per cent. non-lawyer ownership and up to 10 per cent. non-lawyer management, irrespective of the training, professional standards and ethics of those owners and managers and whether they are external or internal owners. Licensing authorities can vary licensing conditions for those low-risk bodies.
The vast majority of likely combinations of well-regulated professionals and lawyers could conceivably be regarded as offering positive benefits for consumers but low risk to consumers. For example, there would need to be 10 lawyer partners to allow one equal partner to come on board for a body to be defined as low risk. That deprives smaller high street or rural practices of the opportunity to come together as low-risk bodies, and inhibits the benefit to consumers of such alternative business structures. Such multi-professional practices have the potential to support access to justice on the high street and in rural areas.
As my hon. Friend the Member for West Bromwich, West said this morning, it is wrong to think that allowing alternative business structures will impact only negatively on access to justice. By offering extra commercial opportunities to small legal practices, and a reduction of back-office and marketing costs, they might aid the survival of such firms in an increasingly competitive market. When different professions combine across different towns, access to justice could be increased.
The current approach of part 5 plunges that combination of small professional practices into the panoply of licensing conditions for alternative business structures of a much higher risk. In effect, it favours those alternative business structures developed by larger law firms and puts extra restrictions and costs on smaller law firms and firms of other professionals that would like to be ABS. Allowing multi-professional practices also offers sizeable benefits to business and consumers. Small enterprises have to go separately to both lawyers and accountants for general business advice. One-stop shops would increase competition, reduce costs and reduce the time taken to develop understanding of a business and its needs. The benefits for our enterprise economy could be significant, and allowing their lawyers and surveyors to come together could cut time and complexity for home buyers.
 What is proposed is a recognition that for the vast majority of professionals, coming together with lawyers when they are both owners and managers of the practice will be low-risk. That will help to ensure opportunities for all sizes of legal practice while enhancing fair competition. The classification of recognised professionals uses a definition used in recent Home Office legislation on money laundering reporting obligations, but makes it tougher by referring to the chartered status of each institute. Furthermore, the additional safeguards that have been proposed would enable the authorised licensing body to challenge the presumption of low-risk and appropriate cases.
 Approved regulators in the board can act in cases where it might be argued that certain professional organisations have regulatory systems that are unacceptable or where certain combinations of services require greater regulatory oversight. I want to pause for a moment to talk about that point. I have seen a lot of support for the institute’s position, most recently from the Federation of Small Businesses. It wrote to the Minister this week—I do not know whether she has seen this yet—to say that it supports the position. It said:
“Lawyers and accountants are the most common sources of small business advice and they can play a vital role in assisting entrepreneurs.
It went on:
“This is why the enablement of multi-professional practices, and greater competition and innovation in the professions, has so much potential for UK enterprise and the wider public interest.” 
 I note, too, that the institute’s position is supported by a number of other chartered institutes—the Chartered Institute of Patent Agents, the Institute of Trademark Attorneys and the Royal Institution of Chartered Surveyors. If I have one hesitation about the matter, it is that in much of what I have said about access to justice provided through such alternative business structures, I have referred to quite small businesses. However, there is nothing in the amendments to stop an extremely large law practice—or a large practice of chartered accountants, for that matter—from forming and claiming that it is a low-risk body.
 That is why new clause 15 is important. It could be said that although the same principle still applies—they should all be highly regulated, well-motivated and honest professionals doing their jobs within their competencies—the very fact that large groups of people doing many different kinds of work come together adds a layer of complexity that would not be present in a much smaller firm. That is why the new clause would allow the licensing authority to say in some circumstances that they will not accept designation as a low-risk body or disapply any of the rules.
Amendment No. 271 is a means of introducing an alternative class of low-risk body related to professionals coming together who are all subject to supervision through a chartered institute. Of the grouped amendments, No. 272 introduces the tie that I mentioned between ownership and management, No. 273 is effectively a consequential amendment concerning professionals as owners, Nos. 274 and 275 are the definitions and, as I have explained, new clause 15 provides a get-out clause for the licensed authorities if it is seen that a particular combination ought not to be regarded as a low-risk body.

David Burrowes: It is a pleasure to follow the hon. Member for Stafford, who served with me on the Joint Committee and was a vocal member. I have been awaiting his voice expectantly, and it has been worth the wait. I support the amendments. I shall try to allay concerns—I can think of one particular hon. Member who may have some—that there might be just some love-in going on among lawyers, accountants and members of established professional bodies. That is certainly not what is going on. In many ways, this is a love-in with consumers.
 We must not forget that small businesses are also consumers of legal and professional services. The hon. Member for Stafford referred to the support of the Federation of Small Businesses, whose 2006 report “Lifting the Barriers to Growth in UK Small Businesses” stated that accountants are the main source of business advice, being consulted at a rate of 54 per cent., followed by solicitors at a rate of 28 per cent. One-stop advice shops could reduce costs to business consumers and increase competition and innovation. The voice of a consumer body is also worth referring to. The National Consumer Federation believes that one-stop shops promise greater convenience and more choice for consumers. It is good that an alliance of consumers, businesses and professionals alike should endorse the amendments.
The high benefits and low risk of multi-professional practices are of prime importance. When well-regulated professions come together in alternative business structures, such businesses will be subject to regulatory regimes. In many cases, all employees will be subject to two regimes—the Bill deals with those regulatory conflicts—but if different skills and backgrounds are brought together, even if professionals remain within the sphere of their expertise, the quality of service is likely to increase.
The Government have set the risk bar at 10 per cent. ownership, but that pays no attention to the individuals’ background or what they will be doing in the practice. Well regulated, multi-professional practices clearly fall below the low risk bar that the Government have set in the Bill, yet they will not be able to take advantage of that low-risk definition.
In essence, the amendments establish that low risk stems from the nature and type of ownership, not necessarily from a percentage interest. I support this balanced group of amendments because the approach has a degree of caution, which the hon. Member for Bassetlaw might welcome. It is right to be cautious; although someone might believe themselves to be professional, they might not yet have reached that stage, so proper regulatory systems need to be in place. There needs to be a check on a combination of services and systems that might threaten the principles of the legal profession. New clause 15 would deal with that by allowing the rebuttal of the presumption of low risk. The board would be at the centre of that decision and it would be allowed to set standards of appropriate professionalism and encourage the professions to take the new opportunities.
The amendments would address my concerns about the impact of this part of the Bill on small businesses. For example, a small legal practice of two persons that comes together with a non-legal professional will be classified as having a higher risk than a practice of 100 partners that takes on 10 non-legal professionals. Given that the non-lawyers would remain in their own area of professional expertise, how would the risk be established consistently? I wonder whether the 10 per cent. rule is appropriate in such a situation, and whether the Government appreciate what its impact will be on the ability of small businesses—and larger ones, to which the hon. Member for Stafford referred—to enter the market and provide a good service to consumers.
 The amendments would benefit consumers as well as businesses of various sizes. They would improve our competitive standing, not least in the City. The difficulties of international regimes and conflicts of interest will, in the main, deter the mergers of larger firms. Those offering services such as forensic investigation and due diligence could benefit especially from specialist, multi-disciplinary practices. If people dealing with business turnaround and insolvency were brought together with those offering legal and other professional advice, it could only help business survival. The one-stop services extolled by the National Consumer Federation, which we wish to support and encourage, would help to reduce costs. That would result in more money for business survival, which would be of assistance to employees.
One might rebut the arguments behind the amendments by asking whether we are not just creating the spectre of Enron. However, we should take comfort from, rather than be concerned about, the interaction between regulatory regimes. The Financial Reporting Council is a good example because it has regulations to prevent the combination of audit and legal services, which has a material impact on the independence of audit. Indeed, such auditing is taking place in only 10 companies of the larger ilk. The FRC no doubt has the concerns of the public in its sights. However, we should not deny opportunities to the vast majority of businesses.
The Institute of Chartered Accountants, which was referred to, has a membership of 12,000 registered accountancy firms. If one does not take the word of the bodies that have been mentioned, one might take note of the approach of Sir David Clementi, whom Members on both sides of the House have sought to pray in aid. We might do so particularly with regard to his intention to ensure that alternative business structures are allowed to develop in a controlled manner.
 The Joint Committee recommended a step-by-step approach. The amendments would create the right structure and utilise the expertise of the licensing authorities and the board to set detailed conditions. They would ensure that barriers to ABS were proportionate to risk, which is one of the Bill’s intentions, and would allow low-risk ABS to be set up more easily. That would provide a better risk-based approach than part 5 of the Bill that would be of benefit to the consumer and would help to mitigate concerns about threats to access to justice. Regulatory scrutiny would be focused on ABS that posed high risk and greater potential for conflicts in respect of access to justice.
As we have heard, the Institute of Chartered Accountants supports the amendments. It should be commended for saying:
“A better risk based approach to facilitation of differing forms of ABS should be adopted. This should utilise existing systems of regulation to concentrate resources on the greatest risks to consumers.”
That would provide appropriate transitional arrangements for existing ABS that should
“ensure minimal disincentives to their continuation.”
The institute says:
“Through such an enhanced risk based approach, costs to the consumer and barriers to innovation can be minimised.”
It is for those reasons that I commend the amendments to the Committee.

Bridget Prentice: I absolutely agree with my hon. Friend the Member for Stafford and the hon. Member for Enfield, Southgate about following the Hampton principles in respect of the risk-based approach. We very much want to do that. The proposed bodies would not have a maximum percentage threshold for non-lawyer management or control. Instead, any number of non-lawyers could be managers and owners—if I understand amendment No. 273 correctly—provided that they were all members of recognised professional bodies.
New clause 15 would provide the board with the power to restrict the professional bodies that would be acceptable in that context for the purpose of determining whether certain professionals could qualify for low-risk status. I can tell that a great deal of thought has gone into the amendments and I commend my hon. Friend for the way in which they have been drafted. Various attempts have been made to add the necessary safeguards, but that may still provide for a wide range of practices to emerge without the requirement of full ABS regulation. I would be reluctant to allow that to happen because I do not believe that they would necessarily all be low risk.
For example, there is no requirement that the non-lawyer owners and managers must be the same or, indeed, that they must be individuals. As a result, a body could be at least partly owned—for example, up to 95 per cent.—by an audit firm and, under the amendments, still be classed as low risk. That is not a desirable outcome and nor is it the outcome that my hon. Friend would want.
More importantly, the amendment would class some forms of multidisciplinary practices as low risk. Even if the non-lawyer professionals were effectively regulated, things would need to be faced when combining different codes and rules, and different services. That is why part 5 is so important because it creates such safeguards to address exactly that situation. I recognise that multidisciplinary practices might bring many benefits, but they must be carefully regulated, as both Sir David Clementi and the Joint Committee recognised. I am therefore still reluctant to waive part 5 safeguards for bodies of that type.
My hon. Friend put his argument succinctly. A young friend who owns an outstandingly successful IT business wrote to me before Second Reading about the one-stop shop that is necessary when people are starting up a small business because of the variety of professionals they have to get in touch with, such as lawyers, conveyancers and bankers. The whole gamut of people who are needed can lead to quite an expense at the early stage of setting up a business. I understand the problem and have a lot of sympathy with small businesses, especially for that reason. I take on board what the Federation of Small Businesses says, and my friend Leigh Caldwell made clear the importance of the one-stop shop.
 My concern is whether it is appropriate to ditch the safeguards in part 5, so I say to my hon. Friend and the hon. Member for Enfield, Southgate, who has been supporting him, that although I shall resist the amendment, I have heard the concerns of hon. Members and small businesses about legal disciplinary practices and the need to ensure that we take a genuinely risk-based approach, as I have said in previous debates. I am exploring whether we can bring forward a viable alternative to cover that until part 5 is up and running. If that is possible, I shall do so on Report. On that basis, I ask my hon. Friend to withdraw the amendment.

David Kidney: We have had a useful, albeit short, debate. My hon. Friend the Minister’s response was extremely constructive, and it was pleasing to hear her say that she would give further consideration to the matter and perhaps say something more positive on Report. Will she give us an assurance that she will continue the dialogue with the various chartered institutes and legal bodies that have an interest, such as the Law Society? Perhaps she will keep Members with an interest in the subject informed of how those negotiations are progressing.

Bridget Prentice: I am more than happy to give my hon. Friend that reassurance. I shall certainly keep him and other members of the Committee abreast of how successful we are in dealing with the matter. I hope that, in turn, he and others will encourage those professional bodies to work closely and positively with us to see whether there is a solution that would be satisfactory all round.

David Kidney: That is very helpful. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 119, in clause 108, page 59, line 7, leave out ‘in which non-authorised persons have an interest’ and insert ‘held by non-authorised persons’.
No. 120, in clause 108, page 59, line 9, leave out ‘power’ and insert ‘rights’.
No. 121, in clause 108, page 59, line 12, leave out ‘in which non-authorised persons have an interest’ and insert ‘held by non-authorised persons’.
No. 122, in clause 108, page 59, line 14, leave out ‘power’ and insert ‘rights’.
No. 123, in clause 108, page 59, leave out lines 20 to 23.—[Bridget Prentice.]

Clause 108, as amended, ordered to stand part of the Bill.

Clause 109

Foreign bodies

Question proposed, That the clause stand part of the Bill.

Simon Hughes: Does the Minister anticipate that, under the clause, it is inevitable and obvious that the Government are likely to advance some provisions in  relation to links between England and Wales, Scotland and Northern Ireland and Ireland? Clearly, the clause will deal with any foreign jurisdiction. However, although we have separate legal systems within the United Kingdom, there are common interests and practices in the three different legal jurisdictions in terms of professional background, and so on—and in relation to Ireland as well. Perhaps the Minister could shed some light on the implications of the clause, which is reasonable and proper but hints at more than it tells us.

Bridget Prentice: In so far as Scotland and Northern Ireland are foreign areas, they would fall under this part of the Bill and the relevant provisions would apply, if necessary, to the different jurisdictions—let us not call them foreign areas—in terms of the legal profession.

Simon Hughes: I should like to probe a little bit further. I do not know whether there is current provision along the lines of part 5 in Scottish law or the law relating to Northern Ireland, so I do not know whether there is any arrangement in either of those two places that would make it obvious whether, for example, a company carrying on such business north of the border in the Six Counties would be likely to want to act here.
The other side of the coin is that, presumably, organisations that are mixed in terms of professional background and expertise might be up and running in other countries. Again, I do not know. Can the Minister share anything with us about whether, as of today, ABS-type organisation is possible in the Republic of Ireland, for example? Is that already legitimate and something that happens? Across the water, on the mainland of Europe, the whole system is different, with the exception of the two common-law countries of Cyprus and Malta, so we are not talking as easily and readily about other European Union countries. Are we expecting companies or business structures to practise and offer services in England and Wales and Northern Ireland or Scotland, or the whole of the British Isles? Lots of the companies that have been mentioned do so. The services offered by Tesco and the AA do not stop at Offa’s dyke, Hadrian’s wall or the Irish sea. Will other organisations act across the jurisdictional boundaries?

Bridget Prentice: I cannot speak for mainland Europe. There is a different system there, and I am not aware, as yet, of any country that will have something similar to this measure, although a number are keen to see how it works and are looking to us to lead the way.
I mentioned on Second Reading that there were aspects of the provision that would allow changes to be made in the Scottish system, as the Scottish Executive had asked us to provide. I am not aware that the Republic of Ireland has such a system, although it is also interested in seeing how it works. However, there are facilities across the English-Scottish border for organisations to work in both places.

Question put and agreed to.

Clause 109 ordered to stand part of the Bill.

Clause 110

Reporting requirements relating to Part 5

Question proposed, That the clause stand part of the Bill.

Simon Hughes: Elsewhere, there will be registers that people can look at to see who is disqualified and who has a licence. It is implied but not yet expressed that the annual report, which is an important part of the accountability process, would be listed and could be found immediately on publication, first, in the place where one looks for the other information that has been referred to in part 5, and secondly, automatically on a website on the day of publication, so that as soon as an ASB published its annual report, it would go up on the site, people would have up-to-date information and its production would ensure maximum transparency.

Bridget Prentice: I think that I can guarantee that.

Question put and agreed to.

Clause 110 ordered to stand part of the Bill.

Clause 111

Interpretation of part 5

Amendments made: No. 124, in clause 111, page 60, line 21, leave out ‘in shares’.
No. 125, in clause 111, page 60, line 24, leave out sub-paragraph (ii) and insert—
‘(ii) are bodies in which persons within paragraphs (a) to (c) are entitled to exercise, or control the exercise of, more than 90% of the voting rights.’.—[Bridget Prentice.]

Clause 111, as amended, ordered to stand part of the Bill.

Clause 112 ordered to stand part of the Bill.

Clause 113

Overview of the scheme

John Mann: I beg to move amendment No. 283, in clause 113, page 61, line 35, at end add—
‘(6) Nothing in this Part is intended to prevent an application to the Solicitors’ Compensation Fund for redress in respect of a determination by an ombudsman with which a solicitor respondent is unable or unwilling to comply.’.
As the lawyer’s friend, may I immediately correct the official record of the statements that the Opposition made? I have nothing but the highest regard for the profession, and all my intentions are deliberate ones to ensure that business goes to those of the highest regard and repute, rather than the minority who bring the profession into such great disrepute. It has been my pleasure in the past 12 months to work with some of the finest people. Mishcon de Reya, Bindman and Partners, Russell, Jones and Walker and Clifford Chance are all excellent proponents of the profession.
It is important that the record is put straight, following those previous comments, because again the vested interests are trying to categorise their attempts to hold down the regulation of their profession and somehow to counterpose those people outwith the profession as opposed to those within it. Quite the opposite: the whole point of self-regulation is that it is made to work effectively, so I propose this modest little amendment to allow the Minister the opportunity to strengthen further the Bill. She may or may not say that it is required, or she may say that it could be covered in other ways, and I wait with eager anticipation.
However, there are situations in which the course of regulation goes in one direction, but there are circumstances in which such power would be important in making the consumer, who has been done over financially, certain of redress, if redress were felt appropriate. I could cite cases to which the amendment would be relevant, but I do not want to detail them, not because of time, but because the cases are ongoing and I should not want to prejudice them. So I offer this modest little improvement to the Minister for her delectation.

Bridget Prentice: My hon. Friend always looks to the centre of the issue. One of our main objectives is to ensure that the consumer gets the proper redress and gets it quickly. I commend my hon. Friend’s assiduous way of going about this—he will sense that there is a “but” coming—but the amendments are not necessarily the right approach. They are ineffective in the sense that there is nothing in the Bill to prevent application for payment under the compensation fund.
 Clause 141 is designed to deal with instances where the solicitor, the barrister, or whoever the authorised person might be fails to pay redress awarded against him to a complainant. Under that clause either the complainant or the ombudsman can go to court to have that determination enforced. It is right that the determination should be enforced by court. A lawyer who has done something wrong should pay redress. If the complainant has to make an application to the compensation fund, that might send the wrong message that it is all right for a solicitor to refuse to comply with an ombudsman’s determination because everyone else will have to cough up on his behalf. That cannot be right.
The compensation fund is a discretionary fund. Only the Law Society and the CLC have compensation funds. It is a fund of last resort, operated by the SRA, where no other avenues are available. If a complainant were awarded £5,000 by the ombudsman as redress and the solicitor refused to pay, clause 141 would allow either the complainant themselves, or the OLC if necessary, to have that enforced through the courts.
If a situation arose where the solicitor genuinely could not pay, it might be possible to make the application for payment from the compensation fund. There is no absolute guarantee of success, but nothing in the Bill prevents that from happening. To that extent the amendment is unnecessary. My other concern is that it applies only if the solicitor is unwilling or unable to pay. What happens if a barrister, legal executive, notary or someone else who is an authorised person does not pay under the Bill? I gently suggest to my hon. Friend that singling out one group—solicitors or complaints about solicitors—goes against this part of the Bill. I do not want to see different systems for different complainants.
 The idea is that the OLC is the single portal for complaints and I think it should also be the single portal for ensuring that those complaints are dealt with and treated consistently and transparently right across the board. That is why I prefer what we have said in clause 141 to these amendments. My hon. Friend is right to say that complainants do not like having to go to court. It can be a daunting and frightening prospect. That is why we tabled amendments in the other place that allow the OLC to bring those court proceedings on behalf of the complainant. If the lawyer does not comply with that determination and the complainant is intimidated, the ombudsman is there as a form of protection and can go to court on the complainant’s behalf.
I hope that my hon. Friend will know that there are no circumstances in which I would want to see any type of lawyer thinking that they might get away with refusing to pay or to comply with an ombudsman’s determination. If redress is awarded against them, they will have to pay it; either immediately or because they will be taken to court to ensure that they pay.
I hope that I have given a sufficiently strong response on behalf of the consumers whom I know my hon. Friend wants to see getting the best out of the Bill, and that he will feel able to withdraw the amendment.

John Mann: I thank the Minister for her response and I note her suggestion that this amendment is not strong enough; I certainly would not wish to have barristers excluded from any provisions in the Bill that they should not be excluded from.
 So, I hear what the Minister is saying in relation to the amendment. However, I shall leave it to her to contemplate that there is potentially a loophole here. Although the Minister says that there is nothing that prevents this situation from happening, there is nothing that would make it automatic. A solicitor may go bankrupt—possibly by choice—or do a runner, perhaps because the volume of potential new complaints, which are comparable to the first one heard, can be added up and counted. That is certainly a possibility, and not just a theoretical one but a real one. If the rest of the country were to follow the example of my constituents, large numbers of people might choose to come forward—for example, miners and textile workers. That would create an interesting paradox. This question of positive powers needs some further reflection.
I hear what the Minister says, that the wording of the amendment may not be strong enough to deal with that situation. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 113 ordered to stand part of the Bill.

Clause 114

The Office for Legal Complaints

Question proposed, That the clause stand part of the Bill.

Simon Hughes: We have slipped, without any but the most observant of us realising, into part 6 of the Bill, which I hope even the Whips will think is relatively good progress. [Interruption.] I said, “Relatively good progress”; the Whips are never entirely happy, but they may be relatively happy at such progress.
 We are now dealing with the first clause that establishes the Office for Legal Complaints. I would just like to make the point here, because it is obviously the right place to do so, that this is a welcome initiative. It is a proposal to ensure that there is, as it were, a one-stop shop for legal complaints, so that the public can be pointed in one direction and go through one door, and that any legal problems that may have arisen—a problem with a solicitor’s firm, or with a member of the Bar, or with both, or a problem anywhere else along the legal representation route—can all be examined together. That is a step in the right direction.
Historically, there are different professions, but the boundaries of their activities have been reduced over the years. Rights of audience, for example, in the courts have been widened; in many ways, that has clearly been a good and successful thing. Again, taking the starting point of the Minister in this respect, for the user of the services it seems to me that when there is a complaints system—such a system is necessary in a professional organisation, particularly those paid for with public money—it is better that we have a system that brings together professions that have so far been apart. Some professions have been much better than others in the past; some have been really quite good at dealing with their own discipline and the complaints that they have faced, and some have been far less good. It seems to me that we need to adopt the standard of the best, to ensure that the system is neither overly bureaucratic nor overly delaying but instead is good, efficient and accountable. The clause opens the door to that and puts forward a proposition that I am sure members of the Committee will support, and that members of the public will welcome.

Question put and agreed to.

Clause 114 ordered to stand part of the Bill.

Schedule 15

The Office for Legal Complaints

Henry Bellingham: I beg to move amendment No. 300, in schedule 15, page 222, line 35, leave out sub-paragraph (2).
Schedule 15 details the arrangements for setting up the Office for Legal Complaints, and deals first with membership. It states:
“The OLC is to consist of the following members...a chairman appointed by the Board with the approval of the Lord Chancellor, and...at least 6, but not more than 8, other persons appointed by the Board after consultation with the chairman.”
Paragraph 1(2) states:
“The Lord Chancellor may by order amend sub-paragraph (1) by substituting, for the limit on the maximum number of persons for the time being specified in paragraph (b) of that sub-paragraph, a different limit.”
 The amendment would remove the provision that enables the Secretary of State to alter the number of members of the OLC. Why should the Secretary of State have any role in fixing that number? Such a provision might have made sense as an emergency power over the LSB but, plainly, it is totally unnecessary here. The LSB is in charge of the OLC; the OLC is responsible to it. It does not make any sense to have the Secretary of State in the chain of command. The amendment would simply delete paragraph 1(2).

Bridget Prentice: The amendment is similar to one that was tabled twice in the other place. It would completely remove the power to change the maximum size of the OLC by order. There seems to be a fear that the Lord Chancellor would have undue influence over the OLC by setting the size of the membership. I do not believe that to be the case, or that the amendment is necessary.
 The OLC is a non-departmental public body and as such is ultimately accountable to Parliament. It must therefore be right for the Lord Chancellor to have a minimum involvement—I deliberately used the words “minimum involvement”—in how the body is constituted. The Lord Chancellor does not have a role in approving the OLC’s rules, such as those about how claims will be handled, apart from the rule on case handling fees. He will also not have a role in handling individual complaints. I do not see that the fears about the Lord Chancellor having undue influence are substantiated.
I hope that hon. Members will appreciate, even if the amendment does not, that there is a need for a mechanism by which to change the size of the OLC membership. Such a mechanism is important because it will allow the OLC to adapt to changing demands, for example, by increasing its expertise and knowledge. It was suggested in the other place that such action could be taken if the matter was left to the LSB; I do not agree.
The OLC is a non-departmental public body—I shall not call it an NDPB because I am worried about the number of abbreviations that I am using, and concerned that I might be beginning to speak a different language altogether. A non-departmental public body is described in “Public Bodies: A Guide for Departments” as a
“body which has a role in the processes of national government, but is not a government department, or part of one, and which accordingly operates to a greater or lesser extent at arm’s length from ministers...The distance of NDPBs from government means that the day-to-day decisions they make are independent as they are removed from ministers and Civil Servants. Ministers are however ultimately responsible to Parliament for a NDPB’s independence, its effectiveness and efficiency”.
As the Lord Chancellor will ultimately be responsible to Parliament for the Office for Legal Complaints, he, not the board, should have a role in changing its size. In practice, he will not make that decision without the board giving its views; that is obvious because the board will have to make the appointments.
 Even if the Lord Chancellor wanted to be mischievous and to create a board twice the size of the one that is presently constituted without telling the Legal Services Board, he could not do it, because the board is under no obligation to make those additional appointments. For those reasons, it cannot just be left to the Legal Services Board. The hon. Gentleman and his noble Friends should have more faith in the Lord Chancellor and how he exercises his role. On that understanding, I ask the hon. Gentleman to withdraw the amendment.

Henry Bellingham: We do not have a great deal of faith in this Lord Chancellor and I suspect that he will not be around for much longer as things stand. But it isnot for us to speculate on that matter in this Committee.
 Conservative Members, especially under our new leadership, believe in smaller Government, and we do not believe in Ministers having so much power. On the other hand, our leader has told us not to be confrontational, so I will be Cameron-compliant on both counts. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 42, in schedule 15, page 224, line 29, at end insert—
‘The terms of appointment of the chairman or any other member may provide for the Board to pay, or make payments towards the provision of, a pension, allowance or gratuity to or in respect of that person. If the Board thinks there are circumstances that make it right for a person ceasing to hold office as chairman or another member to receive compensation, the OLC may pay that person such compensation as the Board may determine.’.
No. 43, in schedule 15, page 224, line 42, at end insert—
‘The OLC may pay compensation for loss of employment to or in respect of an ombudsman (or former ombudsman), or a member (or former member) of staff appointed under paragraph 11.’.—[Bridget Prentice.]

Simon Hughes: I beg to move amendment No. 227, in schedule 15, page 226, line 15, leave out paragraphs 21 and 22.
This is another straightforward amendment to delete a two-part restriction on the powers of the Office for Legal Complaints, which effectively says that it cannot have any dealings with land in that respect. Life should be simple whenever possible, and I see no justification for the proposal. It is entirely reasonable that if a body is being set up it should be given the power to do what it needs to do; even though one cannot envisage the circumstances, such a power might be needed in the future. I am intrigued to know why the Minister thinks we need to tie the hands of the new body so that it cannot do something for five years. It is likely that three and a half years down the track, it will discover that it needs to do something and amending legislation will be necessary to put that right. Would it not be better to take out the appropriate paragraphs, as the amendment suggests?

Bridget Prentice: The amendment would remove the requirement on the OLC to obtain the Lord Chancellor’s consent in the acquisition or disposal of any interest in land during the first five years and the provision that it cannot borrow money except with the general authorisation of the board and the consent of the Lord Chancellor.
I am resisting the amendment because the location of the OLC is important; it has implications for the successful establishment of the ombudsman scheme and for the staff working within the present framework. In recognition of that, on 26 June last year, I made a written ministerial statement to the House explaining that the Government’s preferred location for the OLC is the west midlands.
 That statement also made it clear that Leamington Spa would not be considered. That was to ensure that the OLC will be seen to be a new organisation, independent of the existing framework, and that it will be able to take advantage of a larger local labour market and the benefits associated with moving to a new site. The business case for the west midlands was extraordinarily strong—far stronger than that for any of the other four locations that we considered. It was built on the availability of suitable skills and experience, value for money, commitment to the principles of the Transfer of Undertakings (Protection of Employment) Regulations 1981, and the enforced presumption against locations in London and the south-east following the Lyons review.
Schedule 15(21) deals with the acquisition and disposal of land, and its intention is to ensure, in legislation, that the OLC is bound by the Government’s announcement. In light of the strong business case on which that announcement was based, it is appropriate and necessary. However, I recognise what the hon. Gentleman says about changing circumstances and the requirement on the OLC to seek authorisation from the Lord Chancellor that is imposed by paragraph 21, which is a sunset clause.
 On the conditions placed on the borrowing powers of the OLC, paragraph 22 provides that any borrowing must be subject to safeguards. It must have the consent or general authorisation of the board, and the board must have the consent of the Lord Chancellor. Amendment No. 227 would remove that requirement. Removing those appropriate precautions would mean that, should the OLC face exceptional circumstances that require it to borrow money, it would be able to do so without first requiring the express consent of the board and the Lord Chancellor. We expect the levy to be the OLC’s principal source of funding. Consequently, we do not expect the OLC to exercise its borrowing powers often if at all. However, unforeseen circumstances could arise in which borrowing is the most appropriate way to deal with an issue. It is entirely sensible, therefore, to provide for the OLC to borrow money. It is equally sensible and necessary to comply with Government accounting regulations dealing with borrowing by public bodies to ensure that any borrowing that is done is subject to the appropriate safeguards. In the case of the OLC, it is clear that that should be provided through the oversight and control of both the board and the Lord Chancellor. For those reasons, I ask the hon. Gentleman to withdraw the amendment.

Simon Hughes: I am grateful for the Minister’s reply and I understand it. I shall not seek to divide the Committee. However, I shall be grateful for just one more bit of information along the lines of those that the Minister has volunteered.
All Committee members know that there was a debate about where the new office for dealing with legal complaints would be. I accept that there was a proper assessment and that the best business case was that for the west midlands. However, the Minister knows what the political issue is. It is that part of the complaints system for solicitors has for some while been in Leamington Spa. It has changed its name, title and organisation, but effectively it is still the same sort of organisation in the same place. There is a concern about whether this is a fresh start or a continuation of the old system and not just a rebranding or a repackaging that comes afresh.
 Do I assume, as I have always assumed from what the Minister says, that the TUPE rules will apply, and that all the people currently working at Leamington Spa will be subject to the obligations of the new organisation to seek to employ them, and transfer them? If that is the case, can the Minister remind us how many people currently work for the organisation in Leamington Spa dealing with solicitors’ complaints and how the Minister and the Government hope that there can be a fresh start? It is going to be in the same region, although not in the same town—a matter of 20 or 30 miles away—but will be perceived as being a continuation of the same organisation, just around the corner, up the road. I would be grateful for facts and numbers, confirmation about TUPE, and the Minister’s intention for a new start from what is a continuation, as a result of us passing the Bill later this year.

Bridget Prentice: I shall take those three things in reverse order. First, although I have said it before in a written ministerial statement to all stakeholders, I make it absolutely clear that, under no circumstances, is this exercise to be a rebadging of Leamington Spa. If that were to be the case, it would greatly undermine some of the thrusts of the Bill. I want to make that absolutely clear.
Secondly, the hon. Gentleman, who, like me, represents a London constituency, may not have the best knowledge of the transport links in the west midlands. I am told by some of my colleagues that although the new site might not seem that far away from Leamington Spa, it is not necessarily the most straightforward area, geographically, in which to get from one place to another. I shall have to leave it to others to be more precise about that.
I hope that the hon. Gentleman will agree that it is only right that we use TUPE. It is good employer practice and, although we are not the employers, we want the future employers to uphold good employment practice. That is why I said earlier that despite the fact that we are not obliged to do so, we would use TUPE to deal with the matter.
Thirdly, I should say that the OLC will be different in that it will have its own chief executive and a new board. That will make a big difference, so there is no way that there will be just a straight transfer of staff. In terms of numbers, my understanding is that in Leamington, there are about 300 members of staff. We envisage, according to the last figures that I have received, that up to 80 per cent. of staff will transfer. Some will take early retirement, some will do other jobs and some will decide that they have had enough of dealing with complaints about solicitors. Those are decisions that individuals and their families will have to make. I want to ensure that in the transitional period, we deal sensitively with all the people involved, because it is a time, or for some an opportunity, to think about what they want to do in terms of their careers. We must be responsible about giving them the support to do that properly, and we must be sensitive about people’s needs in that area. That is why we are trying to do this in this fashion, and I hope that that satisfies the hon. Gentleman.

Simon Hughes: I am grateful for the Minister’s confirmation about the answers. I entirely understand and agree with her points about the need to ensure that both the attitude of Government Ministers and parliamentarians is sensitive to the individual circumstances of all those who work there. They obviously argued that they should be allowed to continue, but that was rejected. I have argued a similar view
We need to have an end and a new start. It would help to have confirmation that, although it is not obligatory, two people should apply. It seems sensible. A move of location is clearly one way to indicate a new start. Things need to be done differently, even if with some of the same staff. Although I am not an expert, my recollection of the old geography—in old money, as it were—is that Leamington Spa and Coventry were both in Warwickshire. So far as I know, they still are. The minds of the people therefore cannot be far away, although I remember from bitter experience that, as we all know, traffic jams happen just as much in that part of the world as elsewhere. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 15, as amended, agreed to.

Clauses 115 to 120 ordered to stand part of the Bill.

Clause 121

Performance targets and monitoring

John Mann: I beg to move amendment No. 285, in clause 121, page 63, line 11, at end insert—
‘(za) investigate the handling of complaints by the Office for Legal Complaints (complaints under this subsection include those handled on behalf of the Office for Legal Complaints and those referred to Approved Regulators by the Office for Legal Complaints).’.

Nicholas Winterton: With this it will be convenient to discuss the following:
Amendment No. 286, in clause 121, page 63, line 24, at end add—
‘(6) The Board may take any steps it considers reasonably necessary to ensure the OLC’s compliance with any obligations set under section 118(2)(a), (b) and (c).’.
New clause 7—Intervention directions—
‘(1) The Board may give the OLC an intervention direction in relation to any of its functions if the Board is satisfied—
(a) that despite notice it has failed to handle complaints about authorised persons effectively and efficiently, and
(b) that, in the circumstance of the case, it is appropriate to give the intervention direction.
(2) An intervention direction, in relation to the function of the OLC, is a direction that—
(a) the function is to be exercised by the Board or a person nominated by it, and
(b) the OLC must comply with any instrument of the Board or its nominees in relation to the exercise of the function.
(3) The Board may not determine that it is appropriate to given an intervention direction unless it is satisfied that the matter cannot be adequately addressed by the Board exercising the powers available to it under section (Board’s functions in relation to complaints).
(4) The Board must make rules as to persons it may nominate for the purpose of subsection (2)(a).’.
New clause 8—Board’s function in relation to complaints—
‘(1) If it appears to the Board that complaints about any authorised person are not being handled effectively and efficiently by the OLC, the Board may exercise in relation to the OLC such of the powers in subsection (2) as it considers necessary.
(2) Those powers are—
(a) to investigate the handling of complaints about authorised persons;
(b) to make recommendations in relation to the handling of complaints about authorised persons; and
(c) to require the OLC to submit to the Board a plan for the handling of complaints about authorised persons.
(3) Where the Board requires the OLC to submit to it a plan for the handling of complaints about authorised persons but the OLC—
(a) fails to submit to the Board a plan which it considers adequate for securing that such complaints are handled effectively and efficiently, or
(b) submits to the Board such a plan but fails to handle complaints in accordance with it
the Board may give directions to the OLC.’.
New clause 9—Directions—
‘(1) This section applies if the Board is satisfied—
(a) that the OLC has failed to meet the requirement of section (Board’s functions in relation to complaints) (3)(a) or (b), or
(b) that the OLC has failed to comply with any requirement imposed on it by or under this Act (including this section) or any other enactment.
(2) If, in all the circumstances of the case, the Board is satisfied that it is appropriate to do so, it may direct the OLC to take in a case within subsection (1)(a) or (b) such steps as the Board considers will remedy the failure, mitigate its effect or prevent its recurrence.
(3) A direction under subsection (2) may only require the OLC to take steps which it has the power to take.
(4) For the purpose of this section, a direction to take steps includes a direction which requires the OLC to refrain from taking a particular course of action.
(5) The power to give a direction under this section is subject to any provision made by or under any other enactment.
(6) The Board may take steps as it regards as appropriate to monitor and investigate the extent to which a direction under this section is being, or has been, complied with.
(7) Where the Board revokes a direction under this section, it must—
(a) give the OLC notice of the revocation, and
(b) publish that notice.’.

John Mann: In clause 121, we are dealing with a major principle that needs to be reinforced in one way or another. However, hon. Members will be relieved to know that it can be argued succinctly. It is very straightforward, and I shall illustrate it with a simple example to demonstrate the importance of being able to presume that an investigation is made of the way in which complaints are handled.
 In a survey of my constituents, I asked the following questions: “Did you meet with your solicitor in person?” and, “How did you rate the service you received?” The questions were two of several that I asked of everyone who had made claims for industrial deafness. The results were staggering. Two taken at random were, “No, I never met the solicitor in person,” and, “I do not rate the service at all.” I have received thousands of responses, including, “No, I did not meet my solicitor in person,” “No, only on the phone,” “No, I did not meet with solicitors,” “No, I never met anyone. The service was poor,” “I did not meet anybody in person,” “I never met with my solicitor in person,” “No, I found it strange at the time,” and, “I felt forgotten.”
I could go on and on. So far, I have found one who met his solicitor. In that case, I had arranged for a second solicitor to take over a case in order to sue the previous solicitor; the client had not met the first solicitor, but he met the new solicitor that I arranged for him. None of the others had met their solicitor. I am not saying that I will not come across more, but there have been none so far. Some were quite happy with the service, probably because they received good compensation. Others were not. It is probably related in part to the end result. When one delves deeper, the fundamental issue is that none of my constituents with industrial deafness had met their solicitors, yet the solicitors had made vital decisions about those cases and about the funding of the claims over the telephone. 
 I, on their behalf and at their explicit written request, made a complaint to the Law Society. Over time, the Law Society handled those complaints well, but what happened at the beginning illustrates the importance of being able to investigate the way claims are handled. At the beginning, the Law Society attempted to mediate. That was the tradition, and there is nothing wrong with that. However, during that process of mediation, a new practice started. In this instance, the Law Society rang my constituents to see whether the offer from the solicitor was good enough—thankfully, such practice no longer takes place, certainly not in any case that I put forward. I met my constituents to find out their real wishes. In 80 per cent. of the cases, they thought that the solicitor had rung them. They had never seen the solicitor; most of them had never met a solicitor. They would not know the difference between the Law Society’s claims handling unit, the solicitor or any other body. I have no idea whether those cases are representative of the entire country.
I now have large numbers of textile workers—mainly women—coming forward with similar issues. Therefore, we need to build into the working practices of regulation an ability to investigate how complaints are handled. I suggest that that is in the interests of the regulatory bodies and the good name of the profession. On that basis, I make those suggestions to the Minister as a way of building that more explicitly into the Bill.

Simon Hughes: The three new clauses stand in my name and that of my hon. Friend the Member for Birmingham, Yardley. They are fairly self-explanatory. They pick up the fact that the LSB will have no powers to investigate the OLC. The Bill and the proposed arrangements do not include a provision for the board to intervene if the OLC is deemed not to be handling complaints properly. These are probing new clauses to ask the Minister to reflect on whether there ought to be a measure that provides that oversight and therefore transfers to the board the powers of the legal services commissioner, who oversees complaints under the present system. New clauses 8 and 9 cover the occasions in which that might happen and suggest how appropriate action can be taken.
I think that it is convenient to discuss the wider points in clause 121 now, because the clauses that we have just dealt with and this one fall under a section of the Bill called, “The Office for Legal Complaints”. Will the Minister tell us how the Government envisage separating the handling of complaints about service, as referred to by the hon. Member for Bassetlaw, and complaints about conduct. Complaints about conduct are obviously described as “different” traditionally, although I appreciate that they can overlap.
Finally, there has been reference in the Bill—as there is everywhere else—to the fact that
“the OLC must have regard to such generally accepted principles of corporate governance as it is reasonable to regard as applicable to it.”
Corporate governance has become a buzz phrase. I notice that it appears pretty regularly in legislation. It is never defined very accurately, if at all. I should be grateful to know what is meant by it; we all know in general terms. We are all involved in organisations that are told that they must have good corporate governance according to principles, but does that mean with reference to some code that the Government follow or one that non-departmental Government bodies follow? Is there a starting point, or are organisations, such as the one that we are setting up, expected to go off and find their own best practice? There is a competitive market for best practice in corporate governance. It does not appear to be the holy grail, so having just a trite and bland statement might not be quite enough if the Government want certain principles to be applied.

Bridget Prentice: The OLC will report to and be accountable to the LSB. It will be responsible to the board for its operation of the new ombudsman scheme. The board’s statutory powers relating to the OLC must reflect that relationship, so that the board has effective oversight and can act if the new body is seriously failing to deliver but cannot closely supervise or micro-manage the OLC. It is not for the LSB to deal with the day-to-day handling of complaints. That is why we have set the board’s controls in that way.
I shall explain how the controls work. The first control lies in how part 6 is arranged. The OLC will work through a set of rules that must receive the board’s consent before taking effect, so the board will have complete oversight of how the OLC rules are framed and consequently of how it will operate. The board will also amend or modify any rules that it considers not to be working properly.
 The second control is that the OLC will be accountable to the board through its annual report, which must deal with any matter that the board has directed. For example, it might have to show how it has improved the speed with which complaints are resolved—a similar position to that of some of the bodies that the ombudsman presently regulates. In addition, clause 120 will allow the board to require the OLC to prepare a report on any matter relating to the OLC’s functions at any time. That could include, for example, a strategic plan for remedying a failure to meet a performance target. That is the key power. It will allow the board to maintain effective oversight of the OLC. If it has any concerns about how the OLC is operating, it can require a plan, for example, describing how the OLC proposes to remedy the issue.
Clause 121 will give the board the power to set performance targets, impose conditions on how they should be met and monitor performance against them. It will allow the board to monitor systematically how complaints are handled. The board’s ultimate power relating to the OLC is in paragraph 8(1)(b) of schedule 15, which will allow it to remove members of the OLC. Clearly, that power will be used only when OLC members have failed significantly in the discharge of their duties, but it is nevertheless a hugely important power.
In addition to being subject to those statutory powers, the OLC, as an NDPB, will of course be accountable to Parliament for its efficient use of resources and discharge of its statutory responsibilities, in a way that current complaint-handling or regulatory bodies are not.
 All those powers, taken together, will provide an appropriate and effective control over the OLC. That is why the amendments are unnecessary. They are also inappropriate. Amendment No. 285 would give the board the power to investigate the handling of complaints. Presumably that would allow the board to ask for documents, seize files and so on and to examine how the OLC has dealt with individual cases. That might compromise the independence of the new complaints body and call into question the ombudsman scheme’s compliance with article 6.1 of the European convention on human rights.
I come to amendment No. 286, tabled by my hon. Friend the Member for Bassetlaw. I say to him gently that it is inappropriate, because as far as I can see, clause 118(1)(a), (b) and (c) do not exist. He may have been thinking about a different clause. Perhaps he will reflect on that.
I understand what my hon. Friend is trying to do in seeking to give the board sweeping powers if the OLC strays away from the regulatory objectives, but that power is too broad and sweeping and would result in the board’s becoming too closely involved in the day-to-day running of the OLC, which, as a separate non-departmental public body, is accountable to Parliament in the normal way.
 New clauses 7 to 9 would give the board powers over the OLC that are similar to its powers over approved regulators and similar, to some extent, to the legal services ombudsman’s and Legal Services Complaints Commission’s current powers over approved regulators. However, the new clauses do not recognise that the OLC performs a different function from that of the approved regulators and that its relationship with the board is quite different. It would be a mistake to equate the OLC with the approved regulators in that way. Similarly, the board’s relationship with the OLC is not the same as the one that the legal services ombudsman and the LSCC have with the approved regulators: they are different and that is reflected in different powers—for example, the power to remove the chairman of the OLC from office.
Those proposals would set a lower threshold for intervention by the board, without the procedural safeguards required in relation to approved regulators and would make the board, in relation to the OLC alone, a regulator with the heaviest of touches and risk undermining the OLC’s independence.
The Bill makes no distinction between service and conduct complaints, because there is none. Irrespective of whether the complaint is about poor service, improper conduct or, very often, a mixture of the two, it is important that the ombudsman must decide whether the lawyer behaved in a way that makes it fair and reasonable for the complainant to receive redress and that the ombudsman works out how much should be paid.
If the ombudsman suspects that the lawyer has breached his or her professional rules, the details will be passed to the approved regulator to conduct the investigation, which can take place at the same time as the ombudsman considers redress. I hope that, having explained that and my concerns about my hon. Friend’s amendment, he will ask leave to withdraw it.

John Mann: I picked up my copy of the Bill from the top table and it contains clause 118(2)(a), (b) and (c). This matter ought to be contemplated in forthcoming days and, perhaps, reconsidered as the Bill progresses, because the question of investigative powers is important. I shall leave that with the Minister. Atthis stage, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 121 ordered to stand part of the Bill.

Clause 122

Appointment of the Chief Ombudsman and assistant ombudsmen

John Mann: I beg to move amendment No. 287, in clause 122, page 63, line 32, at end insert—
‘(2A) The majority of persons appointed under paragraph 1(b) must be lay persons.’.
I seek the Minister’s views on this appropriate amendment.

Bridget Prentice: I shall do my best to be brief, like my hon. Friend. I understand where he is coming from. I am equally of the view that neither the Bill, the OLC nor the LSB must become too lawyer focused. The amendment would be unduly restrictive. The OLC must be able to appoint the most qualified and able people as ombudsmen. Assistant ombudsmen will not be acting as a group and therefore according to the views or influence of the majority. Throughout the Bill, there are sufficient safeguards to ensure that the scheme is not, and does not appear to be, biased in favour of the legal profession.

John Mann: The Minister has made it clear, pretty much explicitly and certainly implicitly, that capable people are outwith the legal profession as well as within it, and she nods in concurrence. The point has been made. It is an important principle that such things are seen to be objective. I am sure that the various bodies will take that on board. Therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 122 ordered to stand part of the Bill.

Clauses 123 to 132 ordered to stand part of the Bill.
Further consideration adjourned.—[Mr. Michael Foster.]

Adjourned accordingly at twenty-one minutes toFour o’clock till Tuesday 26 June at half-pastTen o’clock.